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What Contingencies You Should Consider When Buying a Home

couple at an open house with a real estate agent

When you've found your ideal home, the last thing on your mind is the prospect of diving back into the home search. Yet, sometimes unforeseen issues emerge after you’ve closed, making you reconsider your decision. It's important to remember that withdrawing from the sale is typically not a viable option once you've reached a certain stage in the buying process without losing your earnest money.

To protect yourself and avoid these types of situations, it's wise to include specific contingencies in your home purchase contract. A contingency is essentially a safety net within the agreement, detailing conditions under which the contract could be considered void. These contingencies give you a potential exit strategy from the deal in certain circumstances, making sure you're not locked into a decision that no longer makes sense for you.

Home Inspection

A home inspection contingency is crucial to a real estate purchase contract, giving buyers a vital safeguard. This clause allows the buyer to have the home professionally inspected after making an earnest money deposit. The inspection typically covers the home's structure, roofing, plumbing, electrical systems, and more. If major unreported issues are identified during the inspection, the buyer can negotiate repairs, adjust the purchase price, or withdraw from the sale entirely. Waiving this contingency, especially in competitive markets, is generally not advised since it can leave the buyer vulnerable to unforeseen and potentially costly problems.

The importance of this contingency is that it helps uncover hidden issues in a property that may not be seen during a casual walkthrough. For instance, problems like hidden mold or structural damage can have significant financial and health implications. Therefore, having the home inspection contingency in a sales contract is a critical step for buyers to make sure they are fully informed and protected.


The financing contingency is a common and important one in homebuying. This clause means that the home purchase is contingent upon the buyer securing financing, such as a mortgage. If, for any reason, the buyer's loan application is unexpectedly rejected, this contingency provides a safety net, allowing them to exit the contract without penalty.

Sellers often favor buyers who are preapproved for a loan or have the means to pay for the property in cash. This is because deals sometimes fall apart after buyers could not secure a mortgage post-contract signing. This contingency benefits both parties, providing clarity and security about the buyer's financial ability to complete the purchase.


Obtaining homeowners insurance is an important step in the buying process. While not federally mandated, lenders commonly require it as a loan condition. This insurance protects the lender's investment by covering losses and damage to the property due to unforeseen events, like fires or burglaries.

Standard insurance policies often exclude coverage for major natural disasters such as earthquakes and floods, but it's typically possible to add additional protection against these events. The Federal Housing Administration (FHA) highlights the significance of comprehensive homeowners insurance in the process of obtaining a home loan.

Buying or Selling

A property sale contingency clause is often used in real estate transactions, especially when the buyer needs to sell their current home to finance the new purchase. This clause stipulates that the buyer's obligation to move forward with the purchase is contingent upon the successful sale of their existing property within a specific amount of time.

If the buyer is unable to close the sale within this period, the agreement may be automatically terminated. If that happens, the buyer's deposit is typically returned, minus any reasonable costs incurred by the seller. However, it's important to note that including a sale contingency can make an offer less attractive to sellers, as it introduces an element of uncertainty into the transaction.

Homeowners Association (HOA)

When considering a home in a community with a homeowners' association (HOA), it's crucial to understand the HOA's rules and fees. These can range from restrictions on home improvements and exterior appearance to landscaping guidelines. The fees required by the HOA might also impact your budget. Before committing to buy, make sure you are fully aware of the HOA's regulations and willing to follow them. Adding an HOA contingency to your purchase agreement can protect you from unexpected commitments.

It's a good idea to talk about potential contingencies with your real estate agent, so you make sure that you don’t have any regrets and make the best deal possible.

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